Kotak Mahindra Bank To Acquire Standard Chartered's Rs 4,100 Crore Personal Loan Book

Kotak Mahindra Bank Ltd. announced on Friday that it has entered into an agreement to acquire Standard Chartered Bank's personal loan book in India. The country's fourth-largest private lender aims to strengthen its position in the retail credit market. The transaction, valued at Rs 4,100 crore, comprises standard loans and complies with Reserve Bank of India guidelines, according to a stock exchange filing.

The transaction is expected to be completed within three months, subject to regulatory approvals and customary closing conditions. Upon completion, Kotak Mahindra Bank will acquire the outstanding loan book.

"The high-quality loan book from Standard Chartered Bank allows KMBL to build on its strength in the affluent customer segment and further reinforces its leadership in the retail lending space," Kotak Mahindra Bank said in its statement.

This is also the first large acquisition reported under Ashok Vaswani, who took over as managing director and chief executive officer on Jan. 1. Previously, under Uday Kotak, the bank was reportedly looking at buying Citibank's India consumer business, which included the credit card portfolio. However, Axis Bank finally purchased that portfolio.

Interestingly, RBI had barred Kotak Mahindra Bank from onboarding new customers through digital channels and issuing fresh credit cards on April 24. The restrictions were placed owing to deficiencies the regulator observed in Kotak Mahindra Bank's IT systems.

In the quarter ended June, Kotak Mahindra Bank reported net advances worth Rs 3.89 lakh crore, up19% year-on-year. In this, personal loans, consumer durable loans and business loans contributed Rs 20,317 crore, while credit card loans accounted for Rs 14,644 crore.

The acquisition of Standard Chartered Bank's unsecured personal loan book will add to Kotak Mahindra Bank's high yield assets, in the absence of fresh credit card issuances for nearly six months.

In the June quarter, Kotak Mahindra Bank's net interest margin stood at 5.02%, down sharply by 26 basis points sequentially.

In a recent report Bernstein Research had noted that Vaswani's goal to be India's third largest private bank by profitability would expose the lender to M&A risk.

"Given the high growth outperformance ask, inorganic growth would almost be inevitable for KMB to achieve its ‘Top 3’ objective. But even with this route, except IDBI, there are not a lot of easy options to achieve its ambition without a major dent to its RoA," analysts at Bernstein Research said in their October 15 report.

Strategic acquisitions to bolster business growth is not new for Kotak Mahindra Bank. In 2014, the lender acquired ING Vysya in an all-stock deal.

Later in 2016, the bank announced the acquisition of BSS Microfinance. Then in October 2023, Kotak Mahindra Bank announced that it had received RBI approval to acquire the complete stake in Lucknow-based Sonata Microfinance. Both companies operated as subsidiaries of the bank.

Finally, in March 2024, Kotak Mahindra Bank announced that it would merge operations of Sonata Microfinance into BSS Microfinance through a scheme of amalgamation.